Engineering economics, show me step by steps
Two machines are being considered for the same 12-year task. The purchase will be made just at the start of the year 2016 (year 0-1).
This year, Machine A costs $15,000 new and is estimated to last 6 years. At the end of its life, it will have a trade-in value of 20% of its purchase price. The replacement cost of Machine A will increase by 4 percent per year (compounded annually) from its price in the year 2006. The trade-in value will be 20% of the purchase price. It will initially cost $3200 per year to operate and maintain Machine A. The o&m cost for machine A will also increase by 4%/year.
Machine B costs $30,000 new, is estimated to last 12 years, and will have a trade-in value of 25% of its purchase price. It will initially cost $1500 per year to operate and maintain Machine B. The o&m cost for machine B will increase by 4%/year.
Using an interest rate of 6 percent, compounded annually, compare the two machines, and offer a recommendation. State the basis for your comparison. Draw the cash-flow diagram for each alternative.
Engineering economics, show me step by steps
Two machines are being considered for the same 12-year task. The purchase will be made just at the start of the year 2016 (year 0-1).
This year, Machine A costs $15,000 new and is estimated to last 6 years. At the end of its life, it will have a trade-in value of 20% of its purchase price. The replacement cost of Machine A will increase by 4 percent per year (compounded annually) from its price in the year 2006. The trade-in value will be 20% of the purchase price. It will initially cost $3200 per year to operate and maintain Machine A. The o&m cost for machine A will also increase by 4%/year.
Machine B costs $30,000 new, is estimated to last 12 years, and will have a trade-in value of 25% of its purchase price. It will initially cost $1500 per year to operate and maintain Machine B. The o&m cost for machine B will increase by 4%/year.
Using an interest rate of 6 percent, compounded annually, compare the two machines, and offer a recommendation. State the basis for your comparison. Draw the cash-flow diagram for each alternative.
